NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a 'AAAsf' rating to the class A-R notes issued by Magnetite XII, Ltd./LLC. The Rating Outlook is Stable.
Magnetite XII, Ltd./LLC issued class A-R, B-R and C-R notes (collectively, the refinancing notes) and applied the net issuance proceeds thereof to redeem the class A, B and C notes at par (plus accrued interest) on the refinancing date of Nov. 30, 2016. Fitch originally rated only the class A notes.
KEY RATING DRIVERS
The refinancing notes have the same terms as the previously outstanding classes except that the stated coupons have changed and the noncall period will end in January 2018. All of the refinancing notes pay floating coupons. Spreads over LIBOR on the class A-R, B-R, and C-R notes were reduced to 1.33%, 1.80%, and 2.55%, respectively. The class D, E and F notes and the subordinated securities were not refinanced.
The reduction in the cost of the liabilities is viewed as credit positive and no other material changes were made to the capital structure as a result of the refinancing. The transaction is still in its reinvestment period (ending April 2019) and continues to display stable performance since the last review in February 2016. All coverage tests continue to pass, and the rating default rate (RDR) and rating loss rate (RLR) for the current portfolio, plus losses to date, are still lower than the RDR and RLR modelled for the Fitch stressed portfolio at close. As a result, the modelled Fitch stressed portfolio at close continues to serve as a proxy, and updated cash flow model analysis was not conducted for this rating action. Fitch has determined that the rating on the class A-R notes shall be assigned at the same rating level ('AAAsf'/Outlook Stable) as the original class A notes.
The loan portfolio par amount plus principal cash is approximately $595 million, as of the October 2016 trustee report. All collateral quality tests, concentration limitations, and coverage tests are in compliance. The current weighted average spread (WAS) is 3.96%, versus a minimum WAS trigger of 3.77%. The weighted average Fitch rating factor is 'B+/B' (31.4), compared to 'B+/B' (30.6) in the last review. Fitch currently considers 0.2% of the portfolio as defaulted and 6% of the collateral assets to be rated in the 'CCC' category, based on Fitch's Issuer Default Rating (IDR) Equivalency Map. Additionally, approximately 91.6% of the portfolio has strong recovery prospects or a Fitch-assigned Recovery Rating of 'RR2' or higher.
The Stable Outlook on the class A-R notes reflects the expectation that each class has sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio in stress scenarios commensurate with such class's rating.
The rating of the class A-R notes may be sensitive to the following: asset defaults, portfolio migration, including assets being downgraded to 'CCC', portions of the portfolio being placed on Rating Watch Negative, overcollateralization or interest coverage test breaches, or breach of concentration limitations or portfolio quality covenants. Fitch conducted rating sensitivity analysis on the original closing date of Magnetite XII, Ltd./LLC, incorporating increased levels of defaults and reduced levels of recovery rates, among other sensitivities. Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue Report dated May 29, 2015.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool was not prepared for this transaction. Offering documents for U.S. CLO transactions do not typically include RW&Es that are available to investors and that relate to the asset pool underlying the security. Therefore, Fitch credit reports for U.S. CLO transactions will not typically include descriptions of RW&Es. For further information, please see Fitch's Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions,' dated May 31, 2016.
Fitch has assigned the following rating:
--$386,400,000 class A-R notes 'AAAsf'; Outlook Stable.
Fitch does not rate the class B-R and C-R notes.
Additionally, the following class is marked 'Paid-in-Full' (PIF):
--$386,400,000 class A notes.
Sources of Information:
Sources of information used to assess this rating were provided by the arranger (Deutsche Bank Securities Inc.), periodic trustee reports, and the public domain.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Global Rating Criteria for CLOs and Corporate CDOs (pub. 09 Sep 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Dodd-Frank Rating Information Disclosure Form
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